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Is dropshipping a good idea for a home based business opportunity?
Dropshippers and what its about
You may have heard of drop shipping but don’t know what it is. Well it’s a way of selling a product for a profit without ever having sighted it.
How this works is that you can go to thousands of different sites on the internet that offer this service, you can then pick a product from their catalogue, then place the product for sale on an auction site like Ebay, or, your own website, sell the product to a customer, they then pay you, you then return to the drop shipping company and you pay them and they ship the product to your customer.
A good drop shipping company will send the product to your customer without any notification of where its from. That is they don't include anything about their company, a label or invoice so it can be tracked back to them. An excellent drop shipping company will actually put in with the product your name and address so it actually looks like its being sent from you.
How to make a profit from dropshipping
Making a profit from dropshipping depends very much on the product and of course your buying price. Most drop shipping companies sell for about 7 to 8% under retail so that then becomes your profit that you can charge your customer. It doesn't sound much and it isn't but if you turn that product over ten times a day then it can add up, especially if you specialize in something like a $100 watch. Times 8% and you're making $80 a day just from that one watch. From there you can expand out to including say twelve different $100 products and suddenly if you're turning everything over ten times a day you're in the running to make $800 a day. But you should also include more expensive items such as projectors. With items like this that can sell for $800 a lot of people don't necessarily know their worth and so you can buy these for something like $400/$500 and put that much bigger margin on. You probably wont be selling more than one or two a week but it all helps.
Pitfalls of Dropshipping
When looking around for dropshippers scrutinise each one you like the look of very well. Read up on reviews of them. Go on Google and type their name in with scam next to it. Most people if they've had a bad online experience even if they haven't been scammed will endeavour to bad mouth the company by putting scam in the title.
Ways that dropshipping can go wrong are mostly on time it takes for delivery and quality of product. A good dropshipping company will put a years warranty at least on all their products. If they don't I'd be moving onto the next dropshipping company that does.
Delivery times should be that they send the next day after payment. One thing to be careful of here is their stock level. I use a company that if they run out of stock they will immediately remove it from their catalogue. Now that's fine but unless you check regularly you just aren't going to know. So if you're advertising a product and get paid for it by your customer, then find out its not available, you're going to have one upset customer. So the tip is to check every day or two for availability.
Another pitfall for dropshipping is courier delivery. A great dropshipping company will give you a choice of couriers and have their cost to the country you want to send to immediately available. The choices should be something like EMS, DHL and FedEx. The lineup here is cheapest to most expensive, but in terms of delivery its also slowest to fastest. In my experience I've always nominated FedEx as its the fastest and I want to provide the best service to my customers so they have a reason to come back to me to buy more products.
I should have said earlier that when deciding your product costing and profit don't forget to include the courier cost. I always advertise my products as being 'free shipment.' But of course they are paying for the courier along with the product. People always like the idea of getting something free, especially hassle free delivery cost.
Where to find dropshipping companies
They are a lot of dropshipping directories on the internet but most aren't that good. There is a good one though called Salehoo that's a professionally run company just dealing in dropshipping companies. I think the price is $60 to sign up to them but you can have a free trial period as well. Inside the site everything is well catalogued into Antiques, Fashion, Electronics etc. They have about 10,000 different companies to choose from and a lot of them members have given them their own reviews.
Some dropshipping companies charge a fee like $100 to join them but these days you shouldn't have to pay that as there are so many free ones to choose from. So, just find a niche that you're interested in such as fashion or electronics and start sifting through the many companies that have signed up to Salehoo until you find one that you like the look of.
I mainly deal in electronics and deal with one great Chinese company, ChinaVasion. I've never been let down by them and they have a really great site, a lot of product variety, a good support team plus when I've ordered anything they've always (except weekends) couriered the product the very next day. Another thing I like about them is that their warehouse staff personally check that every product is working and not broken before it leaves them.
So, dropshipping may or may not be for you but if money is tight as it is for so many now it's a great way of starting a business with next to nothing in financing it. All you need is enough money to put a few listings on Ebay or if you're internet savvy, make a quick website and put some products on there. I do both. Good luck.